The European Central Bank has gone back to the markets to buy bonds after a five-month pause in an attempt to stop the crisis from spilling to Italy and Spain.
“If we intervene, we intervene, and we’ll publish the amount of what we have done,” said the president of the ECB, Jean-Claude Trichet, referring to the intervention as a “nonstandard measure” aimed at facilitating the flow of money in the euro zone.
In a communiqué the German chancellor Angela Merkel and French president Nicolas Sarkozy welcomed promises by Italy and Spain to boost competitiveness and increase the pace of budgetary consolidation measures, while the ECB is demanding that Italy commit itself to fast-tracking specific welfare reforms and a constitutional amendment enshrining a fiscal rule before it would buy Italian bonds.
“The Italian authorities’ goal to achieve a balanced budget a year earlier than previously envisaged is of fundamental importance,” the communiqué continued, adding that the two leaders “stress that complete and speedy implementation of the announced measures is [the] key to restore market confidence.”
Trichet also joined calls made earlier by the president of the EU Commission, José Manuel Barroso, for national governments and parliaments and the EU Parliament to implement the details of the July deal on a second Greek bail-out, which also gives extra powers to the EU bail-out fund, the EFSF, including that of purchasing bonds on the market.
“We expect all these decisions taken by leaders in July to be executed fully and in a very effective and rapid fashion,” he said. “What has been said by the heads is that they will rapidly finalise negotiations with the European Parliament. We consider it’s essential to have a strong rigorous surveillance.”
So, what are the bets that this subject will top the agenda when the Dáil reconvenes in September?
Meanwhile Barroso has sent a private letter to euro-zone leaders calling for a “rapid reassessment of all elements related to the EFSF, and concomitantly the ESM, in order to ensure that they are equipped with the means for dealing with contagious risk.”
Euro-zone states agreed changes to the scope and nature of the EFSF at a meeting on 21 July, but these have yet to be ratified by individual memberstates. They voted not to increase the size of the EFSF, with Germany in particular set against enlarging the size of the fund. The €440 billion ceiling would not be sufficient to aid Spain or Italy should they need financial assistance from the euro zone. However, Barroso’s letter implies that the total size of the EFSF should be increased, to allow it to cover Italy and Spain.
The letter was heavily criticised by the German vice-chancellor and the Ministry of Finance, with both saying that the debate came at a bad time and that adequate measures had only recently been agreed.
In a sign that concerns are not limited to the Mediterranean area, British regulators are now pushing British banks to make public their exposure to troubled euro-zone countries, including Belgium.People’s Movement · 25 Shanowen Crescent · Dublin 9 · www.people.ie · 087 2308330 · post (at) people (dot) ie